Saturday, February 25, 2012

Foreign Currency Deposit (FCD) accounts are much protected in this country so much so that the Supreme Court (unbelievably) just issued a Temporary Retraining Order against the Impeachment Court’s Subpoena Ad Testificandum et Duces Tecum regarding Chief Justice Renato Corona’s FCD accounts. Plunderers and would-be plunderers have just been officially advised that FCD accounts can be a safe haven for their loot without having to go to Switzerland or the Cayman Islands.

The protection of FCD accounts can be found in the Foreign Currency Deposit Act of the Philippines (Republic Act No. 6426)[1] provides:

“Section 8. Secrecy of foreign currency deposits. – All foreign currency deposits authorized under this Act, as amended by PD No. 1035, as well as foreign currency deposits authorized under PD No. 1034, are hereby declared as and considered of an absolutely confidential nature and, except upon the written permission of the depositor, in no instance shall foreign currency deposits be examined, inquired or looked into by any person, government official, bureau or office whether judicial or administrative or legislative, or any other entity whether public or private; Provided, however, That said foreign currency deposits shall be exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever. (As amended by PD No. 1035, and further amended by PD No. 1246, prom. Nov. 21, 1977.)” (Emphasis supplied.)

Relevant Amendatory Legal Provisions

HOWEVER, relevant to the above provision, we cannot ignore the following provisions (of laws which were all enacted years after R.A. 6426) that belie the “absolutely confidential nature” of all foreign currency deposits:

“WHEREAS, in order to assure the development and speedy growth of the Foreign Currency Deposit System and the Offshore Banking System in the Philippines, certain incentives were provided for under the two Systems such as confidentiality of deposits subject to certain exceptions and tax exemptions on the interest income of depositors who are nonresidents and are not engaged in trade or business in the Philippines;” (Emphasis supplied.)

b)P.D. 1246 further provides -

“Section 3. The same Act is further amended by adding the following Section immediately after Section 12 thereof to read as follows:

"Sec. 12-A. Amendatory Enactments and Regulations. In the event a new enactment or regulation is issued decreasing the rights hereunder granted, such new enactment or regulation shall not apply to foreign currency deposits already made or existing at the time of issuance of such new enactment or regulation, but such new enactment or regulation shall apply only to foreign currency deposits made after its issuance."

R.A. 1246’s, having been enacted 3 years after R.A. 6426, is thus amendatory to R.A. 6426 and limits the scope of the protection over Foreign Currency Deposits accounts to FCDs of “depositors who are nonresidents and are not engaged in trade or business in the Philippines”.

“Section 11. Authority to inquire into Bank Deposits. – Notwithstanding the provisions of Republic Act No. 1405, as amended; Republic Act No. 6426, as amended; Republic Act No. 8791, and other laws, the [Anti-Money Laundering Council] may inquire into or examine any particular deposit or investment with any banking institution or non-bank financial institution upon order of any competent court in cases of violation of this Act when it has been established that there is probable cause that the deposits or investments involved are in any way related to a money laundering offense: Provided, That this provision shall not apply to deposits and investments made prior to the effectivity of this Act.” (Emphasis supplied.)

d)Further, Section 12 of R.A. 9160 provides -

“Section 22. Repealing Clause. – All laws, decrees, executive orders, rules and regulations or parts thereof, including the relevant provisions of Republic Act No. 1405, as amended; Republic Act No. 6426, as amended; Republic Act No. 8791, as amended and other similar laws, as are inconsistent with this Act, are hereby repealed, amended or modified accordingly.” (Emphasis supplied.)

Sections 11 and 22 of R.A. 9160 (which was enacted 27 years after R.A. 6426), provided a 2nd exception to the “upon the written permission of the depositor” exception in Section 8 of R.A. 6426. Now, the AMLC can look into any FCD account under the circumstances provided in said Section 11 above, regardless of the lack of the depositor’s written permission.

e)Sec. 8 of the Code of Conduct and Ethical Standards for Public Officials and Employees (R.A. 6713)[4] which states –

“Section 8. Statements and Disclosure. - Public officials and employees have an obligation to accomplish and submit declarations under oath of, and the public has the right to know, their assets, liabilities, net worth and financial and business interests including those of their spouses and of unmarried children under eighteen (18) years of age living in their households.” (Emphasis supplied.)

Sections 8 and 16 of R.A. 6713 (enacted 15 years after R.A. 6426) thus provide a 3rd exception to R.A. 6426: when the people exercise their right to know the “assets, liabilities, net worth and financial and business interests [of public officials and employees] including those of their spouses and of unmarried children”. As significantly pointed out by Justice Antonio Carpio in his dissent in this month’s case of Philippine Savings Bank, et al. v. Senate Impeachment Court[5] -

“This “obligation” of government officials and employees to disclose all their assets is absolute and has no exception. The right of the public to know the assets of government officials and employees is also absolute and has no exception.”

“A public officer or employee shall, upon assumption of office and as often thereafter as may be required by law, submit a declaration under oath of his assets, liabilities, and net worth. In the case of the President, the Vice-President, the Members of the Cabinet, the Congress, the Supreme Court, the Constitutional Commissions and other constitutional offices, and officers of the armed forces with general or flag rank, the declaration shall be disclosed to the public in the manner provided by law.”(Emphasis supplied.)

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What can we say? All laws – even R.A. 6426 - must bow to the mandates of the Constitution.

Based on the above, it is incorrect to believe that barring the written permission of the depositor, FCD accounts are “absolutely confidential nature”.

Supreme Court Case

In addition to the provisions above – which contradict the “absolutely confidential nature” of foreign currency deposits - the Supreme Court has noted or declared the non-confidentiality of FCDs in a handful of cases. Below is the case that the issue of the confidentiality of FCDs was primarily raised and tackled -

Salvacion, et al. vs. Central Bank (G.R. No. 94723 August 21, 1997)

Simultaneous with a 1989 rape case filed against an American tourist, Greg Northcott Bartelli, the latter’s minor victim and her family filed for damages with preliminary attachment against Greg Bartelli. The writ of preliminary attachment was granted. When the Deputy Sheriff served a Notice of Garnishment on China Banking Corporation, the latter resisted on the basis of Republic Act No. 1405 [An Act Prohibiting Disclosure Of Or Inquiry Into, Deposits With Any Banking Institution And Providing Penalty Therefor]. The Deputy Sheriff replied to China Bank that the garnishment did not violate the secrecy of bank deposits since the disclosure is merely incidental to a garnishment properly and legally made by virtue of a court order. In answer to the Deputy Sheriff of Makati, China Bank invoked Section 113 of Central Bank Circular No. 960 that the dollar deposits of defendant Greg Bartelli are exempt from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body, whatsoever.

Upon inquiry by petitioners with the Central Bank “on whether Section 113 of CB Circular No. 960 has any exception or whether said section has been repealed or amended”, the Central Bank replied that:

“The cited provision is absolute in application. It does not admit of any exception, nor has the same been repealed nor amended.

The purpose of the law is to encourage dollar accounts within the country's banking system which would help in the development of the economy. There is no intention to render futile the basic rights of a person as was suggested in your subject letter. The law may be harsh as some perceive it, but it is still the law. Compliance is, therefore, enjoined.”

In 1990, the Regional Trial Court decided in favor of petitioners and granted P500,000.00 as moral damages to the victim, P300,000.00 to her parents, P100,000.00 as exemplary damages, attorney’s fees and litigation costs. Petitioners then tried to execute on Bartelli's dollar deposit with China Bank but the bank refused to honor the writ of execution based on the Section 113 of Central Bank Circular No. 960 which is copied from Section 8 of Republic Act No. 6426, as amended by P.D. 1246.

Petitioners then sought declaratory relief from the Supreme Court. The SC noted that although it “has no original and exclusive jurisdiction over a petition for declaratory relief … exceptions to this rule have been recognized. Thus, where the petition has far-reaching implications and raises questions that should be resolved, it may be treated as one for mandamus.”

The SC said “[i]t is worth mentioning that R.A. No. 6426 was enacted in 1983 or at a time when the country's economy was in a shambles; when foreign investments were minimal and presumably, this was the reason why said statute was enacted. But the realities of the present times show that the country has recovered economically; and even if not, the questioned law still denies those entitled to due process of law for being unreasonable and oppressive. The intention of the questioned law may be good when enacted. The law failed to anticipate the iniquitous effects producing outright injustice and inequality such as the case before us.”

In making its decision, the SC noted the legal provisions cited by the Solicitor General:

“WHEREAS, in order to assure the development and speedy growth of the Foreign Currency Deposit System and the Offshore Banking System in the Philippines, certain incentives were provided for under the two Systems such as confidentiality of deposits subject to certain exceptions and tax exemptions on the interest income of depositors who are nonresidents and are not engaged in trade or business in the Philippines;

WHEREAS, making absolute the protective cloak of confidentiality over such foreign currency deposits, exempting such deposits from tax, and guaranteeing the vested rights of depositors would better encourage the inflow of foreign currency deposits into the banking institutions authorized to accept such deposits in the Philippines thereby placing such institutions more in a position to properly channel the same to loans and investments in the Philippines, thus directly contributing to the economic development of the country;”. (Emphasis supplied.)

“WHEREAS, it is in the interest of developing countries to have as wide access as possible to the sources of capital funds for economic development;

WHEREAS, an offshore banking system based in the Philippines will be advantageous and beneficial to the country by increasing our links with foreign lenders, facilitating the flow of desired investments into the Philippines, creating employment opportunities and expertise in international finance, and contributing to the national development effort.” (Emphasis supplied.)

“WHEREAS, it is timely to expand the foreign currency lending authority of the said depository banks under RA 6426 and apply to their transactions the same taxes as would be applicable to transaction of the proposed offshore banking units;”.

In allowing the release of defendant’s FCDs to satisfy the judgment in favor of his victim, the SC went beyond the strict wording of the law and said –

“In fine, the application of the law depends on the extent of its justice. Eventually, if we rule that the questioned Section 113 of Central Bank Circular No. 960 which exempts from attachment, garnishment, or any other order or process of any court, legislative body, government agency or any administrative body whatsoever, is applicable to a foreign transient, injustice would result especially to a citizen aggrieved by a foreign guest like accused Greg Bartelli. This would negate Article 10 of the New Civil Code which provides that "in case of doubt in the interpretation or application of laws, it is presumed that the lawmaking body intended right and justice to prevail…

It would be unthinkable, that the questioned Section 113 of Central Bank No. 960 would be used as a device by accused Greg Bartelli for wrongdoing, and in so doing, acquitting the guilty at the expense of the innocent.

Call it what it may — but is there no conflict of legal policy here? Dollar against Peso? Upholding the final and executory judgment of the lower court against the Central Bank Circular protecting the foreign depositor? Shielding or protecting the dollar deposit of a transient alien depositor against injustice to a national and victim of a crime? This situation calls for fairness against legal tyranny.”

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Thus, the SC ruled that “Section 113 of CB Circular No. 960 and PD No. 1246, insofar as it amends Section 8 of R.A. No. 6426 are hereby held to be INAPPLICABLE to this case because of its peculiar circumstances. Respondents are hereby REQUIRED to COMPLY with the writ of execution … and to RELEASE to petitioners the dollar deposit of respondent Greg Bartelli y Northcott in such amount as would satisfy the judgment.”

This case proves that even without the depositor’s written permission, foreign currency deposits aren’t “absolutely confidential nature” after all. It is ironic that the Chief Justice of the Supreme Court - someone sworn to uphold both the letter and spirit of the law - is trying to hide behind its skewed interpretation. An interpretation which, in the interest of justice, was abandoned by the Supreme Court itself. Is it fitting that a case decided against a rapist – a common criminal - ends up being made analogous to his?